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U.K.'s Biggest Bank Upbeat on Pound; Sterling Leads FX Gains

(Bloomberg) -- Britain’s biggest bank is turning more positive on the pound, which on Thursday led the way in advancing against the U.S. dollar.

“We have changed our view on sterling, we have become more upbeat,” said David Bloom, global head of FX research at HSBC Holdings Plc, Britain’s biggest bank by market capitalization. “There is a brand new probability now that maybe there is no Brexit.”

Sterling climbed as much as 0.6 percent Thursday to a two-month high of $1.2965, pushing above the currency’s 100-day moving average and outstripping gains by other major peers. It was buoyed as investors speculated about the prospect of a second Brexit referendum and U.K. opposition leader Jeremy Corbyn said that such a vote remains an option.

The pound has steadily advanced during the past five weeks as the U.K. government and Parliament wrangled over Prime Minister Theresa May’s proposed Brexit deal with the European Union, which was resoundingly defeated by legislators this week. May survived a vote of confidence on Wednesday and opened cross-party talks on how to move forward.

If Britain stayed in the EU, the pound could surge to $1.55, Bloom said. In the case of a soft Brexit, the pound could rise to $1.37 -- the bank’s new year-end 2019 forecast, up from $1.30 previously. An exit from the union without a trade deal would involve sliding to $1.10, Bloom said on Bloomberg TV.

“There’s a possibility of a no-Brexit, there’s a possibility of a referendum, there’s a possibility of a delay,” Bloom said. “You have to blend the probabilities together to come up where you think the FX should be now.”

The pound remains about 13 percent below levels prior to its vote to leave the EU in June 2016. The median projection among forecasters surveyed by Bloomberg is for sterling to reach $1.36 by the end of the year.